Dec 14 (Reuters) – Emerging markets currencies and stocks hit two-week highs on Thursday after the U.S. Federal Reserve tilted to a dovish policy stance, while Argentina’s inflation hit 161%, underscoring the challenges for the new government.
MSCI’s gauge of emerging markets stocks .MSCIEF jumped 1.6%, while a basket of currencies .MIEM00000CUS advanced 0.8% against the dollar by 0927 GMT.
The Fed left interest rates unchanged on Wednesday, with Chair Jerome Powell saying the historic tightening of monetary policy is likely over with a discussion of cuts in borrowing costs coming “into view.”
“The Fed acknowledged the better inflation outlook and the employment slowdown but was careful not to give totally in to market expectations of a quick pace of rate cuts,” said Paolo Zanghieri, senior economist at Generali Investments.
“Chair Powell sounded rather optimistic on inflation and not particularly worried about the last leg of disinflation being particularly difficult,” Zanghieri added.
In South America, the focus remained on Argentina as data on Wednesday showed annual inflation rate hit 161% in November, faster than expected and the highest monthly figure this year.
The data reflected the daunting challenges new President Javier Milei faces in navigating the country’s turbulent economic waters and is the first inflation report since Milei took office last Sunday.
Most regional stocks across Asia jumped, with equities across Turkey and South Africa also advancing.
The only outlier was China, as the Shanghai Composite Index .SSEC and the blue-chip stocks .CSI300 fell 0.3% and 0.5% respectively after data showed new bank lending in China jumped less than expected in November.
However, the Chinese offshore yuan CNH=D3 hit more than a one-week high and was last seen at 7.1435 to the dollar.
Elsewhere in Asia, both the central banks of Philippines and Taiwan kept interest rates steady unchanged.
South African rand ZAR= was little changed ahead of local economic data.
Russia’s rouble RUBUTSTN=MCX rose to a near two-week high and was last trading at 89.5250 per dollar after the Fed decision, while investors awaited the domestic central bank’s policy decision on Friday.
In Central and Eastern Europe, both the Hungarian forint EURHUF= and Polish zloty EURPLN= were down 0.2% versus the euro after rising slightly, while the Czech crown EURCZK= held steady.
The European Commission said on Wednesday that Hungary could start claiming up to 10.2 billion euros ($11.00 billion) in refunds on projects after finding it had fulfilled conditions on the independence of its judiciary.
Brazil’s central bank lowered its benchmark interest rate by 50 basis points on Wednesday for the fourth time in a row and signaled that it would keep cutting rates at that pace beyond its next meeting.
The central bank decisions of Mexico and Peru and Brazil’s retail sales are due later in the day.
(Reporting by Siddarth S in Bengaluru; Editing by Varun H K)
